California Apparel News

A new method of paying for goods on digital commerce is entering the U.S. market, resembling a fresh approach to layaway through digital methods.

Technology-driven payment options are offered through businesses such as Affirm, based in San Francisco; Sezzle, headquartered in Minneapolis; Klarna, which was founded in Stockholm; and Afterpay, based in Australia. Offering buy now, pay later financing that will be familiar to anyone who has paid for merchandise on layaway, most of these companies charge no fees nor interest.

When consumers shop with these payment systems’ brand partners, they select one of the e-layaway companies as their payment method and the apparel label will send goods immediately. Payment companies will collect increments over a monthlong period, but in some cases payments can be stretched over a long time.

For Afterpay, profit is made from merchant fees, which can range from 4 percent to 6 percent of the purchase. Merchant partners are paid in full for customers’ purchases by the next business day, according to an Afterpay representative. A recent statement said it has 2 million customers in the U.S.

On Aug. 5, Klarna announced that it will be working with the American branch of U.K. retailer ASOS, said Eve Williams, ASOS’s brand experience director. ASOS has an established relationship with Klarna, working with Klarna for its British market.

The option of not having to pay upfront gives people a greater liberty to shop. Klarna users shop 20 percent more often and spend 68 percent more per transaction than the average shopper, according to a company statement.

Popular brands and retailers are also stepping up to try the new payment method. Forever 21, Anthropologie, Levi’s, Volcom and Outerknown have worked with Afterpay, while the action-sports brand Etnies works with Sezzle. Kendall + Kylie and online retailer Overstock work with Klarna. These payment companies continue to announce more partnerships.

E-layaway is growing in popularity in the U.K., but it’s already popular in Scandinavia and Australia. Petah Marian, senior editor of WGSN trend forecasters said that Afterpay is used for 10 percent of retail in Australia. It’s particularly popular with Millennials and Generation Z consumers.

“The purchasing power of young people is being squeezed and limited,” she said. “I think there will be a huge appetite for services such as Afterpay and Klarna. You can buy the nicer thing you want, but you won’t have to worry about the higher cost. I expect it will grow.”

Klarna opened its American office in 2014, while Afterpay made its debut in America in 2018 in a partnership with Urban Outfitters, Inc. Nick Molnar, founder and chief executive officer of the company, said that the payment service is aimed at Millennials.

“Afterpay helps shoppers get over that initial price hurdle by offering a platform to help budget for things that they want without needing to take out a loan or open a credit card,” Molnar said. “This is particularly relevant for Millennials, who are reluctant to use credit cards and other forms of traditional financing,”

Afterpay will continue a campaign to build its American office, which is headquartered in San Francisco. On Aug. 8, it announced Afterpay Day, a two-day sale, which will run Aug. 14–15 in partnership with top fashion and beauty brands as well as some retailers.